What next for the food industry?
By Peter Backman of Backman Foodservice Consultancy
“We’re just three days in from the government’s shutdown and the whole industry is reeling under the devastating effects of Covid-19.
It’s easy to take a helicopter view and say the market will recover - it always does - but for those in the thick of it, it’s very hard to see any light at the end of the tunnel. Understandably, emotions are drained and people are, in many cases, looking at merely how to navigate through the day ahead in this world of uncertainty in which are living.
“Two factors have caused me to tear up the forecasts that I made in just the middle of last week. They are, first, the paper from Imperial College which, in effect, has extended the likely period under which the effects of Covid-19 will last, and second the shutdown itself. My initial assumption had been that dining out would fall by an average of 90% for three months. I now expect it to be closer to -95% for at least four months with a slower upside trajectory than I had originally thought. Amid the gloom, there is the macabre thought that feeding in the health care sector will actually increase while practically all other sectors will see previously unimaginable declines for several months.
“According to my calculations*, the foodservice market was down by -9% in Q1, but the catastrophic hit will come in the next quarter (April to June) when the market will be down by 93%, as a result of many closures - work places, schools, restaurants and pubs - and consumers simply not being able or allowed to spend money. Assuming the pandemic is contained as the government hopes, we should start to see a slow improvement in Q3 when the market will likely be down by -53%. Overall, this year I expect sales in the sector to be down by over £22 billion which, I need hardly add, is going to be an unthinkable hit for the sector and its supply chain.
“Many high street operators, understandably, have been turning to delivery as a short term solution. It’s not an ideal model in terms of the bottom line but it puts cash in the till and businesses will take anything they can get in this unprecedented time. While many operators have decided that the best strategy is to close down their business for the duration of Covid-19, for others it’s crucial to adapt and to do whatever’s necessary to keep sales ticking over. Many operators, who have previously steered clear of delivery, are switching to a takeaway and delivery only offer.
However, they should take note that Google searches for restaurant delivery are falling and increasing for retail/supermarket delivery. Things are moving quickly and consumers, faced with the prospect of self-isolation or possible nationwide lockdown, are focusing on getting their groceries delivered, rather than opting for deliveries form restaurants and takeaways. Now, McDonald’s, the standard bearer for much of the industry has announced it will shut its stores and stop delivery. Time will tell what happens here.
The hospitality industry prides itself on being innovative, adaptable and capable of meeting consumer demand, Covid-19 could be the cause of some seismic shifts for the industry as we know it.
If you’d like to chat to chat to Peter about the market and where the future may take us, please give him a call on 07785 242809.
* These calculations are based on Peter’s monthly assumptions about the progression of eating out which he has fed into his quarterly data on each subsector of the hospitality industry. He can provide further detail of the methodology and the resulting sector breakdowns for those that request it.